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2017 (10) TMI 799 - AT - Central ExcisePenalty on Director u/r 26 of CER, 2002 - Clandestine removal by the company - Penalty imposed on director on the ground that he was engaged in day to day affairs of the company SPMPL - case of appellant-director is that Sec. 11A(2) and the proviso thereto would apply and no penalty should be imposed on him - the said company discharged the entire Central Excise duty, interest thereof and also 25% of the penalty amount involved as per the provisions of Sec. 11AC of the Central Excise Act, 1944 - Held that - the assessee M/s SPMPL has settled Central Excise duty as per the provisions of Sec 11A(1A) of the CEA, 1944. The lower authorities seeks to apply the provisions of Sec 11A(2A) in order to penalize the appellant herein under Rule 26 CER, 2002, which in my view, is in not in consonance with law settled by the Hon ble High Court Punjab and Haryana in the case of Vikas Garg 2011 (10) TMI 554 - Punjab and Haryana High Court , where it was held that Once the proceedings against the firm stand concluded, penalty proceedings against partners of the firm cannot continue as Rule 26 of the Rules is not an independent provision but has to be read with Section 11A of the Act. The firm has satisfied the due of the Revenue, therefore, the imposition of penalty under Rule 26 of the Rules are not justified. Demand set aside - appeal allowed - decided in favor of appellant.
Issues:
- Whether the appellant is liable to be penalized under provisions of Rule 26 of the Central Excise Rules 2002 for being the Director of a company involved in evading Central Excise duty. - Whether the penalty imposed on the appellant under Rule 26 is sustainable. - Whether the provisions of Section 11A of the Central Excise Act, 1944 apply to the case of the appellant as a co-noticee. Analysis: 1. The appeal questions the imposition of a penalty on the appellant for his involvement as a Director in a company, SPMPL, found evading Central Excise duty. The investigating authorities concluded that SPMPL was clandestinely removing goods to evade duty, leading to the discharge of the duty, interest, and part of the penalty by SPMPL. The Adjudicating Authority then imposed an equivalent penalty on the appellant under Rule 26, which the appellant contested citing Section 11A(2) provisions. The Appellate Authority upheld the penalty under Section 11A(2A)(b) and explanation thereto, leading to the current appeal. 2. The appellant's representative argued against the penalty, referencing decisions from the Hon'ble High Court of Punjab and Haryana and a Tribunal judgment. The Departmental Representative reiterated the lower authorities' findings. The Tribunal examined whether the penalty on the appellant as a co-noticee was sustainable, considering a common show cause notice issued to SPMPL and the appellant. 3. The Tribunal analyzed the relevant provisions of Section 11A of the Central Excise Act, 1944, particularly focusing on the settlement of Central Excise duty by SPMPL under Section 11A(1A). The Tribunal highlighted that applying Section 11A(2A) to penalize the appellant under Rule 26 was not in line with the legal position established by the Hon'ble High Court of Punjab and Haryana in a similar case involving partners of a firm. 4. Citing the judgment from the Hon'ble High Court of Punjab and Haryana, the Tribunal emphasized that once proceedings against the firm are concluded under Section 11A(2), penalty proceedings under Rule 26 against partners cannot continue independently. The Tribunal also referred to its previous decisions and a recent case to support its conclusion that the penalty imposed on the appellant was not justified. 5. Considering the legal precedents and the specific circumstances of the case, the Tribunal found the impugned order unsustainable and set it aside, allowing the appeal against the penalty imposed on the appellant. The Tribunal's decision was based on the interpretation of Section 11A provisions and the consistent legal position established by higher authorities in similar cases. 6. In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Rule 26 and emphasizing the importance of aligning penalty proceedings with the provisions of the Central Excise Act, 1944. The judgment was pronounced in open court on 13th October 2017.
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